Communication, Coordination and Networks: Online Appendix Syngjoo Choi∗ University College London

Jihong Lee† Seoul National University

July 2012

Online Appendix I - Equilibrium Constructions I.1 Complete network Symmetric equilibria with alternative definitions of agreement Consider the following strategy profile: • t=1 Each player I ∈ {N, E, S, W } plays each message j ∈ {n, e, s, w}, j 6= i, with probability q1 and message i with probability 1 − 3q1 ; • t = 2, . . . , T If there was an “agreement” in t − 1 (we define an “agreement” below), each I plays the corresponding message with probability 1; otherwise, I plays each message j 6= i with probability qt and message i with probability 1 − 3qt ; • t = T + 1 (underlying game) If there was an “agreement” in T , each I plays the corresponding action with prob2 ability 1; otherwise, I plays action i with probability 3k1k+k and each j 6= i with 2 k1 1 probability 3k1 +k2 . ∗

Department of Economics, University College London, Gower Street, London WC1E 6BT, UK (Email: [email protected], URL: http://www.homepages.ucl.ac.uk/∼uctpsc0) † Department of Economics, Seoul National University, Gwanak-gu, Seoul 151-746, Korea (Email: [email protected], URL: http://sites.google.com/site/jihong33) 1 Any observed deviation during the communication stage is punished by continuation play of the pure strategy Nash equilibrium of the underlying game in which each player I plays action i for sure.

1

An “agreement” in period t takes one of three forms - (i) unanimity; (ii) unanimity and super-majority; or (iii) unanimity, super-majority and majority (each of these terms are defined in the main text above). We next describe a recursive process that gives the equilibrium mixing probabilities qt under each agreement form. For t = 1, . . . , T + 1, let ut denote the equilibrium continuation payoff to each player at the beginning of period t, conditional on no agreement having been reached. (i) Unanimity For each t = 1, . . . , T , the following indifference condition characterizes the equilibrium: ut = qt3 k2 + (1 − qt3 )ut+1 = qt2 (1 − 3qt )k1 + [1 − qt2 (1 − 3qt )]ut+1 . Letting k1 = 1 and k2 = 3 as in the experiments, we obtain a recursive equation system 1 − ut+1 6 − 4ut+1 ut = 3qt3 + (1 − qt3 )ut+1 1 uT +1 = . 72 qt =

Let the probability of agreement/coordination at t be denoted by µt . We have µt = 4qt3 (1 − 3qt ). The probability of coordination is then equal to T Y (1 − µt )µT +1 . µ1 + (1 − µ1 )µ2 + · · · +

(1)

t=1

(ii) Super-majority Fix any t ≤ T , and suppose that there was no agreement in t − 1. Given symmetry, without loss of generality, consider player N playing message n and any other message, say, e. For each case, we summarize all possible events and their likelihoods, together with the corresponding continuation payoffs: • N chooses n. outcome likelihood continuation payoff 3 unanimity (on n) qt 3 2 3 3 (qt − qt ) 3 super-majority on n 2 super-majority not on n 3(1 − 3qt )qt 1 2 disagreement 1 − qt (6 − 11qt ) ut+1

2

• N chooses e. outcome unanimity (on e) super-majority on n super-majority on e super-majority on w or s disagreement

likelihood qt2 (1 − 3qt ) qt3 2qt (1 − 3qt )(1 − qt ) + 3qt3 2(1 − 3qt )qt2 1 − 2qt + 5qt2 − qt3

continuation payoff 1 3 1 1 ut+1

This sets up the indifference equation and a recursive system, similarly to the unanimity case above. We can also compute the probability of agreement at t ≤ T to be 1 4 [(1 − 3qt )(3qt2 − 2qt3 ) + 3qt4 ] (the corresponding probability for T + 1 is 108 ). (iii) Majority Fix any t ≤ T , and suppose that there was no agreement in t − 1. Given symmetry, consider player N playing message n or any other message, say, e. For each case, we summarize all possible events and their likelihoods, together with the corresponding continuation payoffs: • N chooses n. outcome likelihood unanimity (on n) qt3 super-majority on n 3 (qt2 − qt3 ) super-majority not on n 3(1 − 3qt )qt2 majority on n 9qt3 + 6qt2 (1 − 3qt ) + 3qt (1 − 3qt )2 6 [qt3 + qt2 (1 − 3qt ) + qt (1 − 3qt )2 ] majority not on n disagreement 1 − 9qt + 36qt2 − 49qt3 • N chooses e. outcome unanimity (on e) super-majority on n super-majority on e super-majority on w or s majority on n majority on e majority on w or s disagreement

likelihood qt2 (1 − 3qt ) qt3 2qt (1 − 3qt )(1 − qt ) + 3qt3 2(1 − 3qt )qt2 2qt2 (1 − qt ) 1 − 7qt + 22qt2 − 22qt3 2qt (1 − 3qt + 2qt2 ) 3qt − 13qt2 + 19qt3

continuation payoff 3 3 1 3 1 ut+1

continuation payoff 1 3 1 1 3 1 1 ut+1

This sets up the indifference equation and a recursive system. We can also compute the probability of agreement at t ≤ T to be 4qt (3 − 18qt + 49qt2 − 51qt3 ). 3

In the following table, we report some key features of the symmetric equilibrium above, for different definitions of an agreement and communication lengths. Given the payoffs used the experimental design (k1 = 1 and k2 = 3), we simulate for each game (i) the probability of coordination in the underlying game (as in (1) above and its counterparts in equilibria with other agreement forms) and (ii) the probability with which each player announces his favorite message/action in the first period of communication. In the table below, each row gives these probabilities calculated from the three equilibria for the game with pre-communication length T .

T

Unanimity Coord prob Mix prob

1 2 3 4 5

0.018 0.027 0.036 0.045 0.053

0.502 0.505 0.507 0.509 0.512

Super-majority Coord prob Mix prob 0.133 0.228 0.302 0.359 0.404

0.589 0.627 0.662 0.694 0.723

Majority Coord prob Mix prob 0.576 0.663 0.667 0.667 0.667

0.774 0.942 0.997 0.999 1.000

A symmetric equilibrium with partial/interim agreements Suppose that T = 2. As in the experiments, k1 = 1 and k2 = 3. We establish the following symmetric mixed strategy equilibrium: • t=1 Each player I ∈ {N, E, S, W } plays each j ∈ {n, e, s, w}, j 6= i, with probability q and i with probability 1 − 3q. • t=2 (1) If there was super-majority or unanimity in t = 1, each I plays the corresponding message with probability 1. (2) If there was majority and message i was played in t = 1, each I plays message i with probability 1 − 2x and each of the other two previously played messages with probability x. (3) If there was majority and message i was not played in t = 1, each I plays each of the three previously played messages with probability 31 . (4) If there was tied-majority and message i was played in t = 1, each I plays message i with probability 1 − y and the other previously played message with probability y. 4

(5) If there was tied-majority and message i was not played in t = 1, each I plays each of the two previously played messages with equal probability; (6) if there was complete disagreement in t = 1, each I plays message i with probability 1 − 3z and each of the other three messages with probability z. • underlying game If there was super-majority or unanimity in t = 2, each I plays the corresponding pure-strategy Nash equilibrium; otherwise, each I plays the symmetric mixed1 2 strategy Nash equilibrium (yielding each player a payoff of 72 ). In order to establish this equilibrium, let us first go through each continuation game at t = 2 (numbered as above). We compute the mixing probabilities and continuation payoffs that support subgame perfectness. (1) The specified continuation strategies are clearly optimal. (2) Given symmetry, without loss of generality, consider player N and suppose that the messages played in the previous period are n, e and s. Let ux refer to the player’s expected continuation payoff in this case. If he chooses message n, his expected payoff amounts to ux = 3 ×

x2 3 |{z}

2x 3 |{z}

+3×

unanimity on n

2x(1 − 2x) 3 | {z }

+

super-majority on n

super-majority on e or s

  4x 1 2 +x + × 1− 72 3 | {z } otherwise

If he chooses e, the expected payoff is x (1 − 2x) +3× ux = 3 | {z } unanimity on e

x2 3 |{z}

1−x 3 } | {z

+

super-majority on n

  x(1 − 2x) 1 2 x 2 + + × − +x . 3 } 72 3 3 | {z | {z }

super-majority on e

super-majority on s

otherwise

Thus, we obtain x = 0.141717 and ux = 0.38276. (3) Consider player N , and suppose that the messages played in the previous period are e, s and w. Let u0x refer to the expected continuation payoff in this case. If he chooses e, then we have   u0x = x2 (1 − 2x) +2 x (1 − 2x) (1 − x) + x3 + | {z } | {z } unanimity on e

2x2 (1 − 2x) | {z }

+

super-majority on s or w

super-majority on e

 1 × 1 − 2x + 3x2 . 72 | {z } otherwise

Substituting for x calculated above, we obtain that u0x = 0.23397. 2

Any observed deviation in period 2 is punished by continuation play of the pure strategy Nash equilibrium of the underlying game in which each player plays his favorite action for sure.

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(4) Consider player N , and suppose that the messages played in the previous period are n and e. Let uy refer to the expected continuation payoff in this case. If he chooses message n, we have   y y 1−y uy = 3 × +3× + + 4 2 4 |{z} | {z } unanimity on n

2−y 1 × 72 4 } | {z

(2)

 1−y y 1+y 1 + + × + 2 4 72 4 } | {z | {z }

(3)

super-majority on n

1−y 4 } | {z

+

super-majority on e

otherwise

If he chooses e, the expected payoff is uy =

1−y 4 } | {z

+3×

unanimity on e



y 4 |{z}

super-majority on n

super-majority on e

otherwise

359 However, (2) can be rewritten as 145 + 288 y, which is strictly larger than 1 for any 144 y ∈ [0, 1]. Thus, we obtain that y = 0 and uy = 1.00694.

(5) Consider player N , and suppose that the messages played in the previous period are e and w. Let u0y refer to the expected continuation payoff in this case. If he chooses e, then u0y =

y (1 − y) + 2 } | {z

unanimity on e

1 − y + y2 2 | {z }

+

super-majority on e

y(1 − y) 2 } | {z

super-majority on w

+

1 1 − y + y2 × . 72 | {z 2 } otherwise

Given y = 0, we obtain u0y = 0.50694. (6) Consider player N . Let u0z refer to the expected continuation payoff in this case. If he chooses message, then uz = 3z 3 + 9(z 2 − z 3 ) + 3z 2 (1 − 3z) +

 1  1 − z 2 (6 − 11z) 72

If he chooses any of the other messages, say e, then  1    uz = z 2 (1−3z)+3z 3 + 2z 2 (1 − 3z) + 2z(1 − z)(1 − 3z) + 3z 3 + 1 − z(2 − 5z + z 2 )) . 72 We therefore obtain z = 0.13691 and uz = 0.19915. Next, let us consider each player’s incentives in t = 1, given the continuation payoffs computed above. First, suppose that player N plays message n. We summarize all the possible events and their likelihoods in t = 1 as well as the corresponding continuation payoffs in the first of two tables below. Second, suppose that player N plays any other 6

action, say, e. The second table below summarizes all the possible events, their likelihoods and continuation payoffs. A simulation exercise from these figures demonstrates that there exists a unique q ∈  0, 31 that solves the indifference condition and it amounts to q = 0.122713. The equilibrium payoff to each player is 0.495797. • N chooses n. outcome in t = 1 unanimity (on n) super-majority on n super-majority not on n majority on n majority on e majority on s majority on w tied-majority (on n) complete disagreement

likelihood q3 3(q 2 − q 3 ) 3q 2 (1 − 3q) 9q 3 + 6q 2 (1 − 3q) + 3q(1 − 3q)2 2q 3 + 2q 2 (1 − 3q) + 2q(1 − 3q)2 2q 3 + 2q 2 (1 − 3q) + 2q(1 − 3q)2 2q 3 + 2q 2 (1 − 3q) + 2q(1 − 3q)2 3[q 3 + 2q 2 (1 − 3q)] 2q 3 + 3q 2 (1 − 3q) + (1 − 3q)3

continuation payoff 3 3 1 ux ux ux ux uy uz

• N chooses e. outcome in t = 1 unanimity (on e) super-majority on n super-majority on e super-majority on s super-majority on w majority on n majority on e and n played by no-one majority on e but n played by someone majority on s and n played by no-one majority on s but n played by someone majority on w and n played by no-one majority on w but n played by someone tied-majority, not including n tied-majority, including n complete disagreement

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likelihood q 2 (1 − 3q) q3 3q 3 + 4q 2 (1 − 3q) + 2q(1 − 3q)2 q 2 (1 − 3q) q 2 (1 − 3q) 2q 2 (1 − q) 2q 3 + 3q 2 (1 − 3q) + (1 − 3q)3 2q(1 − 2q)2 + 4q 3 q(1 − 3q)2 + q 2 (1 − 3q) + q 3 q 3 + 2q 2 (1 − 3q) q(1 − 3q)2 + q 2 (1 − 3q) + q 3 q 3 + 2q 2 (1 − 3q) 2q 3 + 2q 2 (1 − 3q) + 2q(1 − 3q)2 2q 3 + q 2 (1 − 3q) 3q 3 + q(1 − 3q)(1 − q)

continuation payoff 1 3 1 1 1 ux u0x ux u0x ux u0x ux uy u0y uz

I.2 Incomplete networks Star and Kite The following construction is for the Star network. It is straightforward to extend it to the Kite network. Also, suppose that T = 3 (the games with T > 3 can be similarly handled). Consider the following strategies. Beliefs are Bayesian whenever possible. • t=1 The hub, player E, mixes among the four messages with arbitrary probabilities. Each J 6= E plays message j with probability p, each k 6= j, e with probability q and message e with probability r (such that p + 2q + r = 1). • t = 2 and t = 3 If in t = 1 the other three players all played the same message (an “agreement”) then, in both t = 2 and t = 3, E announces that message; otherwise, E announces two (arbitrary) different messages in t = 2 and t = 3. Each J 6= E makes arbitrary announcements in t = 2 and t = 3. • underlying game – If there was an agreement in t = 1 and he played as above in t = 2, 3, E plays the corresponding action with probability 1; if there was no agreement in t = 1 but he deviated from above by playing the same message, i, in t = 2, 3, E plays every j 6= i each with probability 31 ; otherwise, E plays e with probability 1. – If E announced the same message, i, in t = 2, 3 and he himself played i in t = 1, each J 6= E plays i with probability 1; If E announced the same message, i, in t = 2, 3 but he himself did not play i in t = 1 and i 6= j, each J 6= E plays j with probability 1; If E announced the same message, i, in t = 2, 3 but he himself did not play i in t = 1 and i = j, each J 6= E plays e with probability 1; Otherwise, each J 6= E plays j with probability 1. To establish that the strategies constitute an equilibrium, note first that, in equilibrium, the indifference condition of each J 6= E is given by k2 q 2 = k1 pq = k1 r2 where the first term is the expected payoff from playing own favorite message, the second is the expected payoff from playing one of two other messages except for e and the final 8

is the expected payoff from playing message e. It is straightforward to solve for the three probabilities: √ k2 k1 kk √ √ √1 2 p= , q= , r= . 2k1 + k1 k2 + k2 2k1 + k1 k2 + k2 2k1 + k1 k2 + k2 Since k2 > k1 , this implies that p > r > q. Moreover, the probability of coordination on e (which is equal to r3 ) is greater than that on any other action (equal to pq 2 ). It is straightforward to check that deviations are not profitable for E under any off-theequilibrium beliefs. Line network Slight modification to the strategies constructed for the Star (Kite) network above will deliver an analogous equilibrium for the Line network. Consider the following strategies. Beliefs are Bayesian whenever possible. • t=1 Players E and W , mix among the four messages with arbitrary probabilities. Each J ∈ {N, S} plays message j with probability p, each of e and w with probability q and the remaining message with probability r (such that p + 2q + r = 1). • t=2 Player E (W ) plays the message played by N (S) in t = 1. Players N and S play arbitrarily. • t=3 Player E (W ) plays the message that he played in t = 2 if W (E) played the same message in t = 2; otherwise, he plays a different message. Players N and S play arbitrarily. • underlying game – If both he and player W (E) played the same message in t = 2 and t = 3 and that message was played by N (S) in t = 1, player E (W ) plays the corresponding action for sure; If both he and player W (E) played the same message in t = 2 and t = 3 but that message was not played by N (S) in t = 1, E (W ) plays the message of N (S) in t = 1 for sure; Otherwise, he plays e (w) for sure.

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– If E (W ) plays the same message in t = 2 and t = 3 and that message is the message that he himself played in t = 1, N (S) plays the corresponding action for sure; If E (W ) plays the same message in t = 2 and t = 3 but that message is not what he himself played in t = 1, N (S) plays an action that corresponds to neither his message in t = 1 nor the message of E (W ) in t = 2, 3 for sure; Otherwise, he plays n (s) for sure. To compute equilibrium mixing probabilities at t = 1, consider N . His indifference condition is: k2 r = k1 q = k1 p, 3 1 which implies that p = q = 10 and r = 10 . Clearly, the probability of coordination on action e or w is higher than that on n or s.

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Online Appendix II Sample instructions: kite network with T = 2

This is an experiment in the economics of decision-making. A research foundation has provided funds for conducting this research. Your earnings will depend partly on your decisions and partly on the decisions of the other participants in the experiments. If you follow the instructions and make careful decisions, you may earn a considerable amount of money. At this point, check the name of the computer you are using as it appears on the top of the monitor. At the end of the experiment, you should use your computer name to claim your earnings. At this time, you will receive £5 as a participation fee (simply for showing up on time). Details of how you will make decisions will be provided below. During the experiment we will speak in terms of experimental tokens instead of pounds. Your earnings will be calculated in terms of tokens and then exchanged at the end of the experiment into pounds at the following rate: 2 Tokens = 1 Pound In this experiment, you will participate in 20 independent and identical (of the same form) rounds, each divided into two stages: a communication stage, which consists of 2 decision-turns, and an action stage, which consists of a single decision-turn. In each round you will be assigned to a position in a four-person network. In each decision-turn of a communication stage, you will be able to communicate with the other participants to whom you are connected in the network. That is, you will be able to send a message to the connected participants and receive messages from them. Before the first round, you will be randomly assigned to one of the four network positions labeled N, W, S, or E. One fourth of the participants in the room will be designated as type-N participants, one fourth as type-W participants, one fourth as type-S participants and one fourth as type-E participants. Your type (N, W, S, or E) depends solely upon chance and will remain constant in all rounds throughout the experiment.

When you are asked to send your first message, the network and your type will be displayed at the top left hand side of the screen (see Attachment 1). It is also illustrated in the diagram below. A line segment between any two types indicates that the two types are connected and that they can communicate with each other: each can send a message to the other and receive a message from the other. N

W

E

S Note that in the network used in this experiment, type-E participants can communicate with all the other types (N, W, and S) and type-W participants can communicate only with type-E, while type-N participants can communicate with type-E and type-S, and type-S participants can communicate with type-E and type-N.

A decision round Next, we will describe in detail the process that will be repeated in all 20 rounds. Each round starts by having the computer randomly form four-person groups by selecting one participant of type-N, one of type-W, one of type-S and one of type-E, per group. The groups formed in each round depend solely upon chance and are independent of the groups formed in any of the other rounds. That is, in any group each participant of type-N is equally likely to be chosen for that group, and similarly with participants of type-W, type-S and type-E. Groups are formed by the computer. Each round in a group consists of two stages: first, communication stage, and second, action stage. Your final earnings will depend only on what you choose and what others in your group choose in the action stage. Four actions, n, w, s and e, are available in the action stage. The communication stage that precedes the action stage involves each participant sending messages. Four messages are available in the communication stage, and they shall be labeled by the same

letters, n, w, s and e, as the actions available in the action stage. A message may indicate your intended action in the subsequent action stage. However, you do not have to follow your message when it comes to making an action choice. We now describe each of these two stages in more detail. A communication stage The communication stage itself consists of two decision-turns. At the beginning of the first decision-turn, you will be asked to choose a message – n, w, s or e. You will see four boxes, each labeled with a possible message, at the bottom left hand side of the screen. When you are ready to make your decision, simply use the mouse to click on one of them. You will then see a small pop-up window asking you to confirm your decision (see Attachment 2). Once everyone in your group has confirmed a decision, type-E participant in your group will receive the messages chosen by all the other types (type-N, type-W, and type-S) and type-W participant in your group will receive only the message chosen by type-E, while type-N participant in your group will receive the messages chosen by type-E and type-S, and type-S participants in your group will receive the messages chosen by type-E and type-N. For example, if you are type-N participant, you will be informed of which message each of type-E and type-S participants has chosen. This information is displayed at the middle right hand side of the screen (see Attachment 1). This completes the first of two decision-turns in the communication stage of this round. This process will be repeated in the second decision-turn of the communication stage. Note again that when everyone in your group has made a decision in each decision-turn, your chosen message will be sent to each type participant in your group to whom you are connected. Likewise, you will receive the messages chosen by all the other type participants to whom you are connected. An action stage When the communication stage ends, each participant in your group will be asked to choose one action out of the four possible actions, n, w, s, or e, without knowing the action selected by each other. You will see four boxes, each labeled with a possible action, at the bottom left hand side of the screen (see Attachment 3). When you are ready to make your decision, simply use the mouse to click on one of them. This will end the action stage. When the action stage ends, the

computer will inform everyone the choices of actions made by all the participants in your group and the earnings (see Attachment 4). After you observe the results of the first round, the second round will start the computer randomly forming new groups of four participants. The process will be repeated until all the 20 independent and identical rounds are completed. At the end of the last round, you will be informed the experiment has ended. Earnings Your earnings in each round are determined solely by the action you choose and the actions the other participants in your group choose in the action stage. The messages you and other type participants have chosen in the preceding communication stage are irrelevant to earnings. 

If all the participants in your group choose action n, type-N participant in your group will receive 3 tokens and each of the other types (type-W, type-S, and type-E) in your group will receive 1 token.



If all the participants in your group choose action w, type-W participant in your group will receive 3 tokens and each of the other types (type-N, type-S, and type-E) in your group will receive 1 token.



If all the participants in your group choose action s, type-S participant in your group will receive 3 tokens and each of the other types (type-N, type-W, and type-E) in your group will receive 1 token.



If all the participants in your group choose action e, type-E participant in your group will receive 3 tokens and each of the other types (type-N, type-W, and type-S) in your group will receive 1 token.



Otherwise, that is, if all the participants in your group do not choose a common action, every participant in your group will receive 0 token.

For example, if type-S participant chooses action s and all the other types choose action n, every participant will receive 0 token. This information on earnings is displayed at the top right hand side of the screens in both the communication stage and action stage (see Attachment 1 and 3).

Your final earnings in the experiment will be the sum of your earnings over the 20 rounds. At the end of the experiment, the tokens will be converted into money. You will receive your payment as you leave the experiment.

Rules Please do not talk with anyone during the experiment. We ask everyone to remain silent until the end of the last round. Your participation in the experiment and any information about your earnings will be kept strictly confidential. Your payments receipt is the only place in which your name is recorded. If there are no further questions, you are ready to start. An instructor will activate your program.

Attachment 1

Attachment 2

Attachment 3

Attachment 4

Online Appendix III III.1 First half vs. second half Table 1-1A-1. Frequencies of coordination: 1st-half rounds Complete Session 1 2 3 All

T=2 0.63 (40) 0.80 (40) 0.85 (40) 0.76 (120)

Star

T=5 0.66 (50) 0.75 (40) 0.75 (40) 0.72 (130)

T=2 0.53 (40) 0.45 (40) 0.50 (40) 0.49 (120)

Kite T=5 0.70 (40) 0.58 (40) 0.65 (40) 0.64 (120)

T=2 0.68 (40) 0.40 (40) 0.48 (40) 0.52 (120)

Line T=5 0.66 (50) 0.68 (40) 0.65 (40) 0.66 (130)

T=2 0.28 (40) 0.33 (40) 0.38 (40) 0.33 (120)

T=5 0.50 (40) 0.53 (40) 0.50 (40) 0.51 (120)

No Communication 0.08 (75) 0.07 (60) 0.16 (45) 0.09 (180)

Table 1-1A-2. Frequencies of coordination: 2nd-half rounds Complete Session 1 2 3 All

T=2 0.68 (40) 0.70 (40) 0.80 (40) 0.73 (120)

T=5 0.74 (50) 0.88 (40) 0.85 (40) 0.82 (130)

Star T=2 0.75 (40) 0.63 (40) 0.50 (40) 0.63 (120)

Kite T=5 0.75 (40) 0.55 (40) 0.75 (40) 0.68 (120)

T=2 0.45 (40) 0.28 (40) 0.83 (40) 0.52 (120)

Line T=5 0.70 (50) 0.68 (40) 0.58 (40) 0.65 (130)

T=2 0.28 (40) 0.30 (40) 0.45 (40) 0.34 (120)

T=5 0.50 (40) 0.68 (40) 0.68 (40) 0.62 (120)

No Communication 0.03 (75) 0.05 (60) 0.13 (45) 0.06 (180)

Table 2A-1. Frequencies of coordinated actions: 1st-half rounds

Network

T 2

Complete 5

2 Star 5

2 Kite 5

2 Line 5

No Communication

Session 1 2 3 All 1 2 3 All 1 2 3 All 1 2 3 All 1 2 3 All 1 2 3 All 1 2 3 All 1 2 3 All 1 2 3 All

n 0.12 0.34 0.21 0.23 0.24 0.20 0.23 0.23 0.05 0.17 0.25 0.15 0.18 0.13 0.12 0.14 0.19 0.13 0.26 0.19 0.18 0.26 0.12 0.19 0.36 0.00 0.00 0.10 0.25 0.19 0.20 0.21 1.00 0.50 0.86 0.82

Action e s 0.40 0.20 0.22 0.22 0.35 0.21 0.32 0.21 0.36 0.18 0.23 0.27 0.23 0.27 0.28 0.24 0.86 0.05 0.67 0.11 0.45 0.15 0.66 0.10 0.50 0.18 0.57 0.17 0.50 0.15 0.52 0.17 0.56 0.15 0.69 0.19 0.42 0.16 0.55 0.16 0.27 0.21 0.30 0.11 0.35 0.31 0.30 0.21 0.18 0.18 0.69 0.08 0.20 0.00 0.36 0.08 0.35 0.15 0.29 0.14 0.35 0.10 0.33 0.13 0.00 0.00 0.00 0.50 0.14 0.00 0.06 0.12

w 0.28 0.22 0.24 0.24 0.21 0.30 0.27 0.26 0.05 0.06 0.15 0.08 0.14 0.13 0.23 0.17 0.11 0.00 0.16 0.10 0.33 0.33 0.23 0.30 0.27 0.23 0.80 0.46 0.25 0.38 0.35 0.33 0.00 0.00 0.00 0.00

# of obs. 25 32 34 91 33 30 30 93 21 18 20 59 28 23 26 77 27 16 19 62 33 27 26 86 11 13 15 39 20 21 20 61 6 4 7 17

Table 2A-2. Frequencies of coordinated actions: 2nd-half rounds

Network

T 2

Complete 5

2 Star 5

2 Kite 5

2 Line 5

No Communication

Session 1 2 3 All 1 2 3 All 1 2 3 All 1 2 3 All 1 2 3 All 1 2 3 All 1 2 3 All 1 2 3 All 1 2 3 All

n 0.26 0.21 0.22 0.23 0.24 0.31 0.24 0.26 0.13 0.04 0.15 0.11 0.20 0.18 0.10 0.16 0.17 0.00 0.21 0.16 0.14 0.22 0.22 0.19 0.18 0.08 0.00 0.07 0.20 0.22 0.19 0.20 0.00 0.00 0.83 0.45

Action e s 0.26 0.26 0.29 0.29 0.22 0.22 0.25 0.25 0.19 0.30 0.17 0.23 0.35 0.24 0.24 0.25 0.70 0.07 0.76 0.08 0.45 0.10 0.65 0.08 0.40 0.20 0.50 0.14 0.73 0.03 0.55 0.12 0.56 0.17 0.91 0.00 0.61 0.09 0.65 0.10 0.40 0.20 0.41 0.26 0.26 0.22 0.36 0.22 0.36 0.18 0.75 0.00 0.11 0.06 0.37 0.07 0.25 0.20 0.22 0.30 0.44 0.15 0.31 0.22 1.00 0.00 0.00 1.00 0.00 0.17 0.18 0.36

w 0.22 0.21 0.34 0.26 0.27 0.29 0.18 0.25 0.10 0.12 0.30 0.16 0.20 0.18 0.13 0.17 0.11 0.09 0.09 0.10 0.26 0.11 0.30 0.22 0.27 0.17 0.83 0.49 0.35 0.26 0.22 0.27 0.00 0.00 0.00 0.00

# of obs. 27 28 32 87 37 35 34 106 30 25 20 75 30 22 30 82 18 11 33 62 35 27 23 85 11 12 18 41 20 27 27 74 2 3 6 11

III.2 Behavior in the Complete Network Another noteworthy feature of Result 2 in Section 4 is the symmetry of coordinated outcomes in the Complete network. Given all four players are symmetric in this network, it is natural to adopt the symmetric equilibrium as a benchmark framework to approach our games with the Complete network. Table A3-1 presents the frequency of each message played by each subject in the …rst period of communication, together with the frequency of each action in the no-communication treatment. - Table A3-1 about here In all reported treatments, all four players appear to randomize over the entire message set, each attaching the greatest weight on his own favorite message. As expected, the frequency of playing one’s own favorite message is higher in treatments with communication than in the treatment without communication. However, there appears to be no signi…cant di¤erence in the reported frequencies in the Complete network under both time treatments. The frequencies of playing messages other than one’s own favorite are fairly evenly distributed. We next examine how the tendency of playing one’s own favorite message/action changes along the play of the game in the Complete network. To do so, we focus on histories in which all four players chose distinct messages in the previous period (i.e. complete disagreement). Table A3-2 reports the frequency of playing one’s own favorite message after complete disagreement, along with that of playing one’s own favoriate message in the …rst period. - Table A3-2 about here In the Complete network, there is a tendency that players are less likely to choose one’s own favorite message in later periods. This pattern appears qualitatively consistent with the class of symmetric equilibria that we discuss in Online Appendix I.

1

Table A3-1. Behavior in the first period: complete network and no-communication treatments

Complete, T = 2

Type

n

e

s

w

N

0.69

0.10

0.10

0.11

E

0.06

0.82

0.05

0.07

S

0.11

0.11

0.67

0.12

W

0.08

0.05

0.12

0.75

No communication

Type

Message in t = 1

Action n

e

s

w

N

0.50

0.19

0.18

0.13

E

0.31

0.36

0.25

0.08

S

0.30

0.18

0.41

0.12

W

0.34

0.23

0.18

0.25

Complete, T = 5

Type

Message in t = 1 n

e

s

w

N

0.65

0.15

0.11

0.10

E

0.10

0.78

0.05

0.07

S

0.06

0.07

0.76

0.11

W

0.10

0.10

0.12

0.68

Table A3-2. Behavior in the first period and under disagreement in subsequent periods Time (t) Type

1

2

3

4

5

6

All

0.38 (1440)

--

--

--

--

--

T=2

All

0.73 (960)

0.69 (308)

0.64 (92)

--

--

--

T=5

All

0.72 (1040)

0.88 (324)

0.84 (264)

0.64 (152)

0.68 (60)

0.65 (20)

No communication Complete

Note: A disagreement in the complete network means that none of four players chose a common message.

III.3 Individual-level analysis Table 5A. Individual-level analysis: behavior of the hub

Network

T

Session 1

2

2

3 Star 1

5

2

3

1

2

2

3 Kite 1

5

2

3

Subject ID 1 5 9 13 1 5 9 13 1 5 9 13 1 5 9 13 1 5 9 13 1 5 9 13 1 5 9 13 1 5 9 13 1 5 9 13 1 5 9 13 17 1 5 9 13 1 5 9 13

Type E E E E E E E E E E E E E E E E E E E E E E E E E E E E E E E E E E E E E E E E E E E E E E E E E

Non-switching 0.95 0.85 0.85 1.00 1.00 0.85 0.80 1.00 1.00 1.00 0.90 0.65 0.85 0.90 0.80 1.00 0.85 0.95 0.75 0.75 0.75 0.55 0.45 0.90 0.85 0.85 0.90 0.80 0.85 1.00 0.90 0.70 0.75 0.55 0.85 0.80 0.20 0.45 0.25 0.45 0.70 0.55 0.30 0.75 0.65 0.45 0.55 0.35 0.50

Favorite 0.68 0.88 0.53 1.00 0.25 1.00 1.00 1.00 0.25 1.00 0.44 1.00 0.65 0.28 0.56 0.65 0.88 1.00 0.53 0.33 0.87 0.45 0.45 1.00 1.00 0.41 0.56 0.94 0.53 1.00 0.94 1.00 1.00 1.00 0.41 0.88 1.00 0.89 0.60 0.11 1.00 1.00 1.00 0.87 0.38 0.44 0.91 1.00 0.10

Table 5A continued

1

2

2

3

Line

1

5

2

3

1 5 9 13 3 7 11 15 1 5 9 13 3 7 11 15 1 5 9 13 3 7 11 15 1 5 9 13 3 7 11 15 1 5 9 13 3 7 11 15 1 5 9 13 3 7 11 15

E E E E W W W W E E E E W W W W E E E E W W W W E E E E W W W W E E E E W W W W E E E E W W W W

0.90 0.85 0.90 0.70 0.65 0.90 0.60 0.60 0.60 0.85 0.75 0.85 0.35 0.45 0.60 0.55 0.75 0.60 0.65 0.60 0.70 1.00 0.95 0.80 0.25 0.15 0.25 0.70 1.00 0.50 0.40 0.40 0.70 0.30 0.25 0.45 0.50 0.40 0.50 0.75 0.65 0.45 0.50 0.45 0.55 0.45 0.50 0.55

0.94 0.35 0.33 0.50 0.23 1.00 0.67 1.00 1.00 1.00 0.53 1.00 0.71 0.44 0.83 0.64 0.07 0.92 0.38 1.00 0.86 1.00 1.00 1.00 1.00 0.67 0.40 0.36 1.00 1.00 0.75 0.25 0.36 0.17 1.00 0.44 0.50 0.88 0.60 0.67 0.69 0.56 0.80 1.00 0.55 0.56 0.50 0.91

Table 6A. Individual-level analysis of behavior of the periphery

Network

T

Star

2

Session Subject ID 4 8 12 16 2 6 1 10 14 3 7 11 15 4 8 12 16 2 6 2 10 14 3 7 11 15 4 8 12 16 2 6 3 10 14 3 7 11 15

Type N N N N S S S S W W W W N N N N S S S S W W W W N N N N S S S S W W W W

2 0.41 (17) 0.13 (15) 1.00 (18) 0.06 (18) 0.86 (14) 0.10 (20) 1.00 (5) 0.29 (7) 0.83(6) 0.00 (2) 1.00 (16) 0.42 (19) 0.33 (9) 0.26 (19) 0.10 (20) 1.00 (18) 0.44 (18) 0.75 (4) 0.38 (16) 0.50 (14) 0.13 (15) 0.75 (12) 0.29 (13) 0.18 (17) 0.17 (12) 0.29 (17) 0.20 (15) 0.94 (18) 0.78 (9) 0.40 (15) 0.22 (18) 0.17 (18) 1.00 (18) 0.11 (19) 0.32 (19) 0.12 (17)

3 0.56 (9) 0.69 (13) 1.00 (2) 0.69 (16) 1.00 (5) 0.78 (18) 1.00 (2) 0.00 (6) 1.00 (1) 0.00 (2) 1.00 (3) 0.50 (14) 0.40 (5) 0.93 (14) 0.12 (17) 0.67 (3) 0.45 (11) 1.00 (1) 0.73 (11) 1.00 (8) 0.73 (15) 1.00 (1) 0.64 (11) 1.00 (12) 0.00 (12) 0.11 (1) 0.50 (10) 1.00 (1) 1.00 (2) 0.64 (11) 1.00 (13) 0.92 (13) 1.00 (2) 0.94 (16) 0.67 (12) 0.15 (13)

Time (t ) 4 -------------------------------------

5 -------------------------------------

6 -------------------------------------

Table 6A continued

1

Star

5

2

3

4 8 12 16 2 6 10 14 3 7 11 15 4 8 12 16 2 6 10 14 3 7 11 15 4 8 12 16 2 6 10 14 3 7 11 15

N N N N S S S S W W W W N N N N S S S S W W W W N N N N S S S S W W W W

0.08 (13) 0.00 (14) 0.00 (18) 0.47 (17) 0.40 (15) 0.00 (18) 0.41 (17) 0.21 (14) 1.00 (8) 0.17 (12) 0.60 (15) 0.21 (19) 0.00 (19) 0.19 (16) 0.00 (18) 0.50 (17) 0.56 (9) 0.19 (16) 0.05 (20) 0.30 (20) 0.50 (20) 0.53 (17) 1.00 (17) 0.25 (20) 0.13 (16) 0.00 (20) 0.13 (15) 0.12 (17) 0.35 (17) 0.50 (10) 0.07 (14) 0.00 (18) 0.44 (16) 0.00 (18) 0.11 (18) 0.43 (14)

0.00 (13) 0.07 (15) 0.00 (18) 0.44 (9) 0.18 (11) 0.00 (18) 0.45 (11) 0.45 (11) 1.00 (1) 0.09 (11) 0.38 (8) 0.00 (14) 0.00 (18) 0.08 (13) 0.00 (18) 0.50 (9) 0.60 (5) 0.23 (13) 0.16 (19) 0.00 (15) 0.25 (12) 0.22 (9) 1.00 (1) 0.06 (16) 0.06 (17) 0.00 (20) 0.00 (15) 0.06 (18) 0.27 (15) 0.56 (9) 0.07 (14) 0.00 (18) 0.23 (13) 0.05 (20) 0.18 (17) 0.30 (10)

0.07 (14) 0.07 (15) 0.00 (17) 0.33 (6) 0.44 (9) 0.00 (17) 0.43 (7) 0.29 (7) 1.00 (1) 0.20 (10) 0.00 (5) 0.15 (13) 0.00 (19) 0.17 (12) 0.22 (18) 0.20 (6) 0.33 (3) 0.25 (8) 0.44 (16) 0.00 (15) 0.33 (12) 0.33 (9) -- (0) 0.13 (15) 0.13 (16) 0.00 (20) 0.07 (15) 0.06 (17) 0.64 (11) 0.80 (5) 0.08 (12) 0.00 (17) 0.18 (11) 0.00 (18) 0.21 (14) 0.15 (13)

0.00 (14) 0.27 (15) 0.00 (17) 0.25 (4) 1.00 (5) 1.00 (17) 0.33 (6) 0.17 (6) 0.00 (1) 0.00 (7) 0.50 (4) 0.18 (11) 0.82 (17) 0.25 (12) 0.86 (14) 0.60 (4) 1.00 (5) 0.14 (7) 0.89 (9) 0.47 (15) 0.10 (10) 0.13 (8) 1.00 (1) 0.00 (13) 0.07 (14) 0.00 (19) 0.73 (15) 0.00 (17) 0.80 (5) 0.50 (2) 0.82 (11) 0.72 (18) 0.55 (11) 0.06 (18) 0.36 (11) 0.29 (14)

1.00 (14) 1.00 (11) 0.88 (17) 0.33 (3) -- (0) 1.00 (1) 0.25 (4) 0.29 (7) 0.00 (1) 0.25 (8) 0.00 (4) 0.89 (9) 1.00 (3) 0.38 (8) 0.50 (2) 1.00 (3) -- (0) 0.86 (7) 0.50 (2) 0.25 (8) 1.00 (8) 0.38 (8) -- (0) 0.00 (14) 0.93 (14) 0.84 (19) 0.80 (5) 0.47 (15) 1.00 (1) 1.00 (5) 0.75 (4) 1.00 (6) 0.80 (5) 0.63 (16) 0.44 (9) 1.00 (11)

Table 6A continued

1

2

2

3 Kite 1

5

2

3

3 7 11 15 3 7 11 15 3 7 11 15 3 7 11 15 19 3 7 11 15 3 7 11 15

W W W W W W W W W W W W W W W W W W W W W W W W W

0.15 (13) 0.35 (20) 0.18 (17) 0.00 (17) 0.12 (17) 0.06 (18) 0.13 (16) 0.40 (5) 0.00 (18) 0.22 (9) 0.33 (6) 0.24 (17) 0.00 (13) 0.31 (16) 0.12 (17) 0.00 (16) 0.17 (18) 0.22 (18) 0.17 (18) 0.36 (14) 0.00 (20) 0.29 (14) 0.00 (17) 0.00 (16) 0.15 (13)

0.38 (13) 0.64 (14) 0.46 (13) 1.00 (15) 0.07 (15) 0.82 (17) 0.15 (13) 0.67 (3) 0.80 (15) 0.64 (11) 0.43 (7) 0.92 (13) 0.07 (15) 0.15 (13) 0.11 (18) 0.11 (19) 0.07 (15) 0.13 (16) 0.00 (14) 0.00 (8) 0.06 (18) 0.18 (11) 0.07 (14) 0.18 (17) 0.29 (14)

------------0.43 (14) 0.00 (11) 0.00 (19) 0.13 (15) 0.00 (13) 0.07 (14) 0.14 (14) 0.56 (9) 0.06 (17) 0.00 (7) 0.07 (14) 0.14 (14) 0.31 (16)

------------1.00 (9) 0.44 (9) 0.43 (14) 0.73 (11) 0.60 (10) 0.23 (13) 0.00 (13) 0.57 (7) 0.06 (17) 0.17 (6) 0.00 (10) 1.00 (12) 0.36 (14)

------------0.50 (2) 0.50 (6) 1.00 (8) 1.00 (4) 0.75 (4) 0.93 (14) 0.77 (13) 0.57 (7) 0.40 (15) 0.67 (6) 0.89 (9) 1.00 (2) 0.36 (14)

Table 6A continued

2

Line

1

5

2

3

4 8 12 16 2 6 10 14 4 8 12 16 2 6 10 14 4 8 12 16 2 6 10 14 4 8 12 16 2 6 10 14 4 8 12 16 2 6 10 14 4 8 12 16 2 6 10 14

N N N N S S S S N N N N S S S S N N N N S S S S N N N N S S S S N N N N S S S S N N N N S S S S

0.07 (14) 0.50 (16) 0.94 (17) 0.06 (17) 0.47 (17) 0.13 (15) 0.60 (15) 0.40 (15) 0.33 (18) 0.18 (17) 0.27 (11) 0.06 (16) 0.00 (18) 0.11 (19) 0.69 (13) 0.09 (11) 0.18 (17) 0.05 (20) 0.00 (7) 0.47 (19) 0.47 (15) 0.00 (16) 0.00 (13) 0.21 (14) 0.11 (18) 0.12 (17) 0.17 (18) 0.39 (18) 0.00 (18) 0.12 (17) 0.41 (17) 0.11 (18) 0.35 (17) 0.41 (17) 0.57 (14) 0.11 (18) 0.15 (13) 0.58 (19) 0.32 (19) 0.12 (17) 0.41 (17) 0.20 (20) 0.00 (17) 0.26 (19) 0.06 (18) 0.26 (19) 0.00 (19) 0.18 (17)

0.17 (12) 0.30 (10) 1.00 (6) 0.27 (11) 1.00 (9) 0.00 (12) 0.71 (7) 0.63 (8) 0.67 (12) 0.55 (11) 0.57 (7) 1.00 (9) 0.67 (15) 0.40 (15) 0.50 (4) 0.25 (8) 0.67 (12) 0.94 (16) 1.00 (6) 0.42 (12) 1.00 (7) 0.22 (9) 0.63 (8) 0.08 (12) 0.00 (16) 0.00 (13) 0.00 (16) 0.08 (13) 0.00 (15) 0.43 (14) 0.36 (14) 0.19 (16) 0.27 (15) 0.42 (12) 0.56 (9) 0.19 (16) 0.40 (10) 0.60 (10) 0.36 (14) 0.27 (15) 0.44 (9) 0.24 (17) 0.29 (17) 0.20 (15) 0.00 (18) 0.33 (15) 0.22 (18) 0.13 (15)

------------------------0.35 (17) 0.36 (11) 0.07 (14) 0.21 (14) 0.07 (14) 0.00 (9) 0.40 (10) 0.38 (13) 0.25 (12) 0.60 (10) 0.25 (8) 0.79 (14) 0.00 (6) 0.29 (7) 0.63 (8) 0.67 (12) 0.25 (8) 0.18 (17) 0.42 (12) 0.17 (12) 0.06 (17) 0.44 (9) 0.92 (12) 0.33 (15)

------------------------0.83 (12) 1.00 (8) 0.42 (12) 0.10 (10) 0.18 (11) 0.20 (10) 0.80 (5) 0.22 (9) 0.38 (8) 0.60 (5) 0.67 (6) 1.00 (6) 0.00 (5) 0.86 (7) 1.00 (4) 0.57 (7) 0.43 (7) 0.45 (11) 1.00 (8) 0.40 (10) 0.06 (17) 0.57 (7) 1.00 (5) 0.55 (11)

------------------------0.80 (5) 1.00 (3) 0.43 (7) 0.45 (11) 0.89 (9) 0.33 (9) 1.00 (3) 0.33 (6) 0.20 (5) 0.33 (3) 0.75 (4) 1.00 (2) 0.25 (8) 0.80 (5) 0.00 (1) 0.75 (4) 0.71 (7) 0.75 (8) 1.00 (2) 0.86 (7) 0.94 (16) 0.75 (4) 1.00 (2) 0.71 (7)

Communication, Coordination and Networks: Online ...

July 2012. Online Appendix I - Equilibrium Constructions. I.1 Complete network. Symmetric equilibria with alternative definitions of agreement Consider the following strategy profile: • t = 1 ..... Each round starts by having the computer randomly form four-person groups by selecting one participant of type-N, one of type-W, ...

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